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When are signals complements or substitutes?

Tilman Börgers (tborgers@umich.edu), Angel Hernando-Veciana (angel.hernando@uc3m.es) and Daniel Krähmer

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: The paper introduces a notion of complementarity (substitutability) of two signals which requires that in all decision problems each signal becomes more (less) valuable when the other signal becomes available. We provide a general characterization which relates complementarity and substitutability to a Blackwell-comparison of two auxiliary signals. In a special setting with a binary state space and binary, symmetric signals, we find an explicit characterization that permits an intuitive interpretation of complementarity and substitutability. We demonstrate how these conditions extend to the general case. Finally, we study implications of complementarity and substitutability for information acquisition and in a second price auction.

Keywords: Complementarity; Substitutability; Value; of; information; Blackwell-ordering; Statistical; decision; problem; Information; acquisition; Second; price; auction (search for similar items in EconPapers)
Date: 2007-03
References: Add references at CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: When are signals complements or substitutes? (2013) Downloads
Working Paper: When are Signals Complements or Substitutes (2010) Downloads
Working Paper: When are Signals Complements or Substitutes? (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we072111

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